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Dow Dives Again; Congress Votes on Spending Deal; Fiscal Hawks Disappear; Officials Knew About Porter. Aired 1-1:30p ET

Aired February 8, 2018 - 13:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


ANNOUNCER: This is CNN breaking news.

WOLF BLITZER, CNN HOST: Hello, I'm Wolf Blitzer. It's 1:00 p.m. here in Washington. Wherever you're watching from around the world, thanks very much for joining us.

Let's begin with breaking news on Wall Street. Once again, the Dow plunging as the wild swings continue.

Let's go live to CNN's Maggie Lake. She's on the floor over there at the New York Stock Exchange.

Maggie, update our viewers.

MAGGIE LAKE, CNN BUSINESS CORRESPONDENT: Yes, Wolf, the remarkable thing about this is the day started very calm. The Dow was only off about a tenth of a percent.

But as the afternoon progressed, we saw the selling pick up. A lot of people talking about the fact that stock investors looking at bonds yields. There's concerns that the U.S. economy is overheating. It's growing too fast. It's pushing up bond yields. And that is what is spooking people.

But, honestly, other traders say they don't think that that's the reason. This is just a market that overshot on the up side, rallied too far too fast, and now the sellers are in control of the market.

What was unnerving is the speed that the selling on the downside seems to pick up again. That technology, some of those algorithms kicking in and selling.

And so, the volatility we saw at the beginning of the week seems to be coming back with a vengeance this afternoon -- Wolf.

BLITZER: What's interesting, Maggie, if you take a look, the record Dow high was only a couple weeks or so ago, on January 26, the Dow closed at 26,616. It's now, as we speak, 24,300 or so. That's a drop of more than 2,000 in a couple weeks. What are they saying about that?

LAKE: Yes, it is. And, again, for it to happen in such a short period, a little unnerving. But people say, listen, you have to take a long-term view, fundamentals are good, jobless claims this morning, 45-year low. That's good news for workers. Earnings, 78 percent of S&P 500 companies are beating on their earnings.

So, the long-term fundamentals are good. And you may, indeed, see some buyers come back in again, Wolf, if we continue to see these losses to the down side.

But there is a feeling that the market's looking for a floor. That maybe that record high we saw wasn't justified by the fundamentals. If you're in a rising interest rate environment, maybe that was too high a level.

So, we're trying to figure out what seems like fair value in an era where we're looking at interest rates move higher, a federal reserve that may be a little more aggressive and an era of really cheap money that's over.

What's fair value there? No one seems to know and that's why you're seeing this volatility.

People would like it to be a little bit more orderly over a longer period of time and not condensed into one week. But that is some of the -- some of the themes that people are talking about down here.

BLITZER: Yes, a lot of nervousness right now. Two thousand plus point drop in two weeks or so, that'll create some nervousness.

All right, Maggie, thank you very much.

Let's get to the firestorm right now, surrounding the White House chief of staff, John Kelly. Kelly is under a lot of fire right now for his full-throated defense of the White House staff secretary, Rob Porter.

Kelly called him a man of integrity, a man of honor. Even after allegations became public that Porter had physically abused two ex- wives.

(BEGIN VIDEO CLIP)

WALTER SHAUB, FORMER DIRECTOR, U.S. OFFICE OF GOVERNMENT ETHICS: You've got Kelly saying that he believes the man. Well, what does Kelly base that on? He looked deep into the man's soul and perceived innocence?

I doubt Kelly went out and interviewed those women himself and decided that they were liars.

He just decided that the white male employee working for him couldn't possibly beat his former wives because he said he didn't. Well, that's ridiculous and shame on John Kelly.

(END VIDEO CLIP) BLITZER: After Porter's resignation yesterday, Kelly said he was shocked by the allegations even though he'd known about those allegations for months.

Let's bring in our Chief White House Correspondent Jim Acosta.

Jim, what's the talk surrounding Kelly right now and how has the president been reacting to this upheaval in the west wing?

JIM ACOSTA, CNN CHIEF WHITE HOUSE CORRESPONDENT: Well, Wolf, we should point out, at this hour, actually at this very moment, the White House was supposed to hold its daily briefing.

The White House press secretary Sarah Sanders is away. Her deputy, Raj Shaw, is supposed to hold that briefing with reporters now at 2:30 this afternoon. Obviously, that briefing is going to be about Rob Porter and what was going on behind the scenes over the last several months.

As we've been reporting over the last 24 hours, Wolf, the White House was aware last fall that there were problems with Porter's background check, the security clearance background check that goes on over here at the White House for people who are in critical positions.

And there are few people inside this White House who had a more critical condition than the staff secretary, Rob Porter, who's stepping down. He was with the president on, basically, a daily basis. Yet, he had this very dark past.

And what is very curious to a lot of people, and I think this is going to be a topic at the briefing, is what did John Kelly, the Chief of Staff, know and when did he know it?

Obviously, he put out that glowing statement about Rob Porter, right before Sarah Sanders held that press briefing yesterday, essentially defending the staff secretary, in light of these allegation.

[13:05:01] And then, last night, Wolf, late last night, there was a new statement from Kelly, walking some of that back but still standing by his praise.

When we talked to senior White House officials last night, a senior White House official told me that one of the reasons why they were putting those glowing statements out about Porter yesterday afternoon was that they were reacting slowly, essentially, to the latest story, the latest bombshell that included that photograph of one of Porter's ex-wives with a black eye.

And so, this was an acknowledgment, essentially, from the White House that they were just responding too slowly to events.

But you have to wonder, Wolf, and we were discussing this last night, why did it take a photograph for this White House to, really, change its attitude, its posture towards Rob Porter, who, we understand, is going to be out the door and permanently gone from the White House as soon as today. But, undoubtedly, Wolf, this is going to come up at the briefing. And I think the real question is, what does the future hold for chief of staff, John Kelly? Because this goes right to the heart of judgment of somebody who was supposed to run the west wing staff.

I talked to a retired general who didn't want to have his name mentioned but has known Kelly for a long time, served with Kelly in Iraq, who said to me, I don't know this John Kelly, raising questions about the chief of staff's judgment -- Wolf.

BLITZER: Jim Acosta at the White House. We'll get back to you. We'll stand by for the White House briefing. Clearly, lots of questions on this expected.

Let's bring in our panel right now. Amber Phillips is joining us. She's a political writer for "The Washington Post" political blog "The Fix." Also with us, CNN Political Director David Chalian and CNN's Chief Political Analyst Gloria Borger.

You know, he says he's shocked now, John Kelly, but he's known about this for months. He's known that the FBI refused to give him top secret clearances, any permanent security clearances, even though he's the -- he's the person that gives the president the most sensitive documents on a daily basis.

GLORIA BORGER, CNN CHIEF POLITICAL ANALYST: Right, Dana Bash and I did some reporting on this last night. And we learned that Kelly has known about this since last fall. The question is, how much did he know? Did he see the FBI documents? We don't know the answer to that.

His conflicting statements last night seemed to say, if you look at them, that he was misled in some way. That there was new information. We're not sure what the new information is. Maybe it's a photograph. I'm not quite sure what qualifies as new information.

I think the subtext here is that, perhaps, he had talked to Porter about it. We don't know. And Porter said to him, you know, this isn't true or whatever. And maybe he just believed him.

But we have to do some more digging about these kind of conflict elements we're all getting in this -- in this -- in this story, as we talk to people both inside and inside of the White House.

One thing we do know, though, is that the president did not know about this. And we were told that when the president was told about this, he was, let's just put it, very unhappy.

BLITZER: The president didn't know that he didn't have permanent security clearances?

BORGER: He didn't -- according to our reporting, the president was surprised by this entire story and first learned about it when he was presented with that piece from "The Daily Mail" which broke the story.

BLITZER: But General Kelly, you know, retired a Marine Corps, you know, general. He would know if one of his top aides doesn't have -- the FBI is refusing to give him security clearances. He would know all about that, because, presumably, he would want that aide to have those kinds of clearances.

DAVID CHALIAN, CNN POLITICAL DIRECTOR: Of course. And he would be the person to receive -- perhaps the White House counsel first and then the chief of staff. But would receive that information to be aware of that because he's, as you know, running the entire ship there in the west wing. Chief operating officer, if you will, of this enterprise.

And here is a person who has to be in charge of the entire paper flow, information flow in that way, into the Oval Office and on to the president's desk. That involves dealing with some sensitive material. There's no doubt about that.

Never mind that, with all of these issues in any White House, the biggest concern, when you have some dark past like this, that it gets revealed in an FBI background check, is that you're potentially vulnerable to blackmail. And that, obviously, is nothing folks would want.

As Gloria said, I guess we have to learn, what does it mean to -- for the president to learn of this? Had he heard any conversations or rumblings before? Was it a completely brand-new piece of information? We'll have to learn what it means --

BORGER: Right.

CHALIAN: -- for the president to have learned of it just as it became public.

But it is clear -- and you're right, you mentioned the photo, Gloria. From the public perception of data points, the photo seemed to change from a 100 percent rally around Rob Porter, defensive White House, to champion him in a lot of the initial statements.

To, now, what seems to be a White House ready to roll the bus over him as if, perhaps, they didn't have all the information that he had.

[13:10:03] BORGER: Because they didn't -- they couldn't look at the -- at the FBI reports, obviously, which said that his ex-wife had gotten a restraining order against him which, one would think, is a huge red flag in anyone's security claim.

BLITZER: They didn't want to believe it.

How much trouble is Kelly -- General Kelly in right now? We know that he has made some other mistakes. The president was irritated over some other issues. Other senior officials have been irritated by some of the statement he's made, some of the actions he's taken. Amber, how much trouble is he in?

AMBER PHILLIPS, POLITICAL WRITER, "THE WASHINGTON POST": Yes, it's hard to say. But I would say, from the perspective of President Trump, what we know is this. He does not want his aides to be taking the headlines from him. He does not want his aides to be injecting themselves in controversy. The president loves controversy but that's the president's job to do.

Now, I hesitate to say Kelly's out the door because of this, because the president tends to give deference to generals. My colleagues at "The Washington Post" have reported that they yell at each other. Sometimes there's profanities. But at the end of the day, the president respects this Marine Corps general.

But that being said, the longer this goes on and the more and more reporting we do to -- and if it looks like there, indeed, was a cover- up, I could see the president deciding that not only Rob Porter has to go, but the person who, arguably, covered it up has to as well.

BORGER: And I've been told by a couple of sources that while the president may be upset, he is being advised, for lots of reasons. One of them being, of course, that he has this legal issue staring him right in the face with Bob Mueller, et cetera. That now would not be a good time to fire anybody at the White House.

However, it's also Donald Trump and you, kind of, never know what he's going to do. So, nobody will predict, with any certainty, what he would do.

But it's clear to me that they're trying to advise the president, for a whole host of reasons, that maybe he shouldn't do that, at this point.

BLITZER: David, how much trouble -- forget about Kelly for a moment. I think he's in some trouble right now, for this and other decisions he's made.

But Hope Hicks, the Communications Director at the White House, who had a romantic relationship with Rob Porter. And she contributed to writing some of these very positive statements about him, at a time when she, presumably, should have recused herself from doing that.

And Don McGahn, the White House Legal Counsel, who, presumably, was being briefed by the FBI, that this guy, you know what? He's got some issues. He's never going to get security clearance. Deal with it. How much trouble is he in?

CHALIAN: Well, I think the McGahn scenario could, potentially, be far more serious than the Hope Hicks' scenario that you described. I think it's an odd choice that she was involved in crafting statement around this, and, sort of, performing her communications' director function when she had a personal relationship.

But I don't know that there is a guideline for a needed recusal in that matter, the way you see it on the Supreme Court or something in a legal setting.

But for McGahn, the White House Counsel, who -- that is where the vetting of everyone in the White House exists, right? All of this process finds its way through the White House counsel's office.

Clearly, there is a vetting issue with Rob Porter. And I would imagine that they are going to be questions that the White House counsel has to exist (ph).

And as we discuss all these -- when did he know -- What did he know, when did he know? Both the president and the chief of staff. I do think if John Kelly had information, it'll be interesting to know his process and how the president feels about it, about what he chose to share or not share with the president.

BLITZER: All right, guys, there's a lot more we're going to have on this story. It's developing right now. We're standing by for the White House briefing as well. We'll see what they have to say about Rob Porter and more.

The briefing room still pretty empty but that'll be full fairly soon. The White House set to respond to these very serious, new questions.

And it won't be Sarah Sanders, by the way. It'll be the deputy secretary, Raj Shaw. Who's never done it before. Standing in front of those reporters answering questions. We'll have live coverage of that.

Plus, hell, no. That's what one House Republican says about the spending bill coming his way. Liberals and conservatives speak out against it. It's a stand-off escalating right now. We'll update you on that.

Plus, there's breaking news, as we reported from Wall Street. The Dow down, right now, 581 points. As this wild swing continues, you're going to hear what's driving today's dive.

We'll be right back.

[13:14:23]

(COMMERCIAL BREAK)

[13:18:25] BLITZER: Congress votes today on a massive two-year spending bill. A bipartisan agreement means a government shutdown at midnight tonight is unlikely, but it's not a done deal yet. The Senate is expected to approve the agreement very soon. The House is where things could get a bit dicey.

Our congressional correspondent Phil Mattingly is up on Capitol Hill, closely following all these late-breaking developments.

Phil, House Democrats are facing a tough choice over whether to support the Senate bipartisan compromise deal. What's their dilemma and will there be enough of them to get it passed?

PHIL MATTINGLY, CNN CONGRESSIONAL CORRESPONDENT: Well, Wolf, their dilemma is really quite simple at this point, it's immigration, it's DACA and it's the lack of firm commitment that there will be a clear pathway to a resolution on that going forward. What they want is, frankly, what Senate Majority Leader Mitch McConnell has laid out in his chamber, the idea that a bill with no finger or thumb on the scale, one way or the other, will be put on the floor and whoever gets the most votes for amendments will end up winning.

The dispute, Wolf, is over essentially four words. Speaker Paul Ryan saying repeatedly that he absolutely wants to deal with DACA. He absolutely wants to put something on the floor that the president supports. That's the issue right now for Democrats. They want that clause essentially to be wiped away. If you want to get a sense of the dispute, just take a list to the two leaders earlier today.

(BEGIN VIDEO CLIP)

REP. NANCY PELOSI (D), MINORITY LEADER: Many of our priorities are in the bill. I have an unease with it and hope that the speaker will man up and decide that we in the House can also have what Mitch McConnell guaranteed in the Senate, a vote -- a vote on the floor.

REP. PAUL RYAN (R), HOUSE SPEAKER: We want a DACA solution. Guess what? In order to shift our focus and get on to the next big priority, which is a DACA solution, we've got to get this budget agreement done so that we can go and focus on this. And I said it once and I'll say it again, we will bring a DACA solution to the floor.

(END VIDEO CLIP)

[13:20:15] MATTINGLY: Wolf, the speaker making clear, he's not going to move -- remove the president from this equation, and that, obviously, has led to question about where the votes actually are.

But if you take the first part of that sound you heard from Leader Nancy Pelosi, you get a sense of where Democrats actually are here. Leader Pelosi's staff was in these negotiations throughout. They were crucial to bringing very significant wins for Democrats that are in this spending bill. This $300 billion spending deal. Overall, it costs about $500 million. That's something that Democrats want, the $130- plus billion on the non-defense domestic side addresses a lot of key priorities the Democrats have had. And that's why, when I talked to a lot of Democratic members or staffers over in the House over the course of the last 24 hours, they acknowledge, they're very frustrated on DACA. They're very frustrated with the speaker. But, in the end, they believe the votes will be there, at least enough votes to get them over the edge.

Now, why do they need Democrats here in a majority-only chamber? Well, it's the size and scale of this deal. A group of conservatives, fiscal hawks, have made very clear, the spending itself goes way too far, even though they're happy with the defense increases. The non-defense is a problem. The $90 billion in disaster relief that's not paid for, that's a problem as well.

So Speaker Ryan is going to lose a decent chunk of his caucus, maybe 30, 40, 50 senators -- or congressmen. That's why they are going to need Democrats. How many they're going to get, that's still an open question.

But, Wolf, as you noted, as of this moment, aides feel pretty comfortable they'll get there. It's just a matter of how and when.

BLITZER: They've got to do it before midnight tonight to avoid a government shutdown. I assume they will do that.

All right, thanks, very much, Phil, for that report.

One of those conservatives on the House side is joining us right now, Republican Congressman Ted Yoho of Florida. He's a member of the House Foreign Affairs Committee. Also the House Freedom Caucus.

Congressman, thanks for joining us.

REP. TED YOHO (R), FLORIDA: Thanks for having me on, Wolf.

BLITZER: All right, so you just heard Phil's report. You know the House Freedom Caucus put out its official position on Twitter. I'll read it -- read it to you.

HFC, House Freedom Caucus, opposes the caps deal. We support funding our troops but growing the size of the government by 13 percent is not what the voters sent us here to do.

That's in contrast to what we heard from speaker, your speaker, Paul Ryan. He said he believes there would be enough votes in the House to pass the Senate deal. You think any members of your Freedom Caucus will vote yea?

YOHO: Yes, I think there will be a few members on there. I'm undecided yet. You know, the bill came out. We got the bill this morning. It's 652 pages. Of course, about 130 of those pages are an amendment that was on the other Senate bill. We haven't been all the way through that yet. So we've got to weigh into that.

And, you know, we've got to fund the government, I think we're all in agreement with that. But how you fund it is a difficult -- a different question that we've got to work through. There's some ugly stuff in this that just add to our debt. And as General -- one of the generals in the past said, the biggest threat to our national security is our debt. This is adding $1.2 trillion just to our deficit before the fiscal year end of 2018. Just the deficit. And so the bill is going to have 500 -- a little over $500 billion extra spending and so we've got to wade through, what do we have to do for our district, for our state, you know, coming from Florida, if a hurricane -- but we've got to balance that on our -- on our nation.

BLITZER: Because the military, you heard the Defense Secretary James Mattis, he really wants it -- the military wants the additional funding to -- for the men and women of the U.S. military.

But you're saying right now you're still undecided?

YOHO: I'm undecided on this, yes. You know, and I've got to do that balancing, you know. And this is where it gets really tough. You know, that was Admiral McMullen's said that several years back. We can do the short-term fixes for these things now, but the long-term bill is going to be there that's going to be on the back of the American taxpayers.

You see the rise of the interest rates. You know what the debt -- the interest on our debt is. And so it's a juggling act. Do we -- do we serve the immediate now or do we look long-term? And the mere fact that we're just funding until March 24th, this is the fifth CR since the end of the fiscal year. You remember the days they had the little donut spare tires on our cars? The manufacturers did that to cut costs and to save money. And it was meant to be a temporary fix for our car to get from the flat tire to the service station. But we saw people running down the interstate, 70 miles an hour, with that little donut tire. Then they'd have two or three of them on there. That's where our country is right now.

BLITZER: For the military and for -- for a lot of other critically important spending issue, this is a two-year plan. It's not just going to simply go until the end of March. And that's why they -- they wanted certainly the Republican leadership and the Democratic leadership in the Senate want it.

YOHO: Absolutely.

BLITZER: Here's what a lot of your fiscal conservatives like you probably --

YOHO: And I agree with that. We need that longer term.

BLITZER: Probably --

YOHO: Go ahead.

BLITZER: Probably find hard to believe that there's a Republican in the White House, Republican leadership in the Senate, Republican leadership in the House. The last couple years, mostly during the Obama administration, the federal annual budget deficit was around $500 billion or $600 billion.

[13:25:18] Do you know what it's going to be this current fiscal year, fiscal year 2018, if all of this goes through? Do you know what the federal annual deficit for this year, congressman, is going to be?

YOHO: It's $1.2 trillion is what I've heard from a member from the Ways and Means Committee.

BLITZER: It's going to be -- it's going to be more than a trillion dollars.

YOHO: Right, $1.2 trillion.

BLITZER: It's been a long time since there was a trillion-dollar annual debt. And so the question, I guess, that a lot of people are asking is, who's responsible for increasing this federal deficit? The debt in this year going from, let's say, 600 billion to over a trillion dollars, who do you blame for that? Are you blaming the president?

YOHO: Well, they're -- no. The American people are going to look at Congress and said, you guys, we gave you the majority for a reason. And so we're going to take -- we're going to take the hit on this. And, again, Wolf, you and I have talked about this. This is going up, regardless who's in the White House. Until Congress --

BLITZER: Well, let me interrupt. Let me interrupt, congressman, because, as you know, you want to cut what's called entitlement spending, Social Security, Medicare --

YOHO: No, mandatory -- mandatory spending.

BLITZER: You want to cut it. The speaker wants to cut it. The Republican leadership wants to cut it. You know who doesn't want to touch any of that?

YOHO: Yes, the president.

BLITZER: The president. So I asked the question, because if you start at the deal with those entitlement spending, you might be able to get closer to a balanced budget. But if you're not going to deal with that, because the president says you can't touch Social Security, you can't touch Medicare, you can't touch Medicaid, he said it repeatedly during the campaign, you're not -- you're just going to have an increase in the deficit every year.

YOHO: You're absolutely right. And you and I have talked about this before. It's not cutting those programs. It's reforming those programs so that they meet their long-term goal that they were designed for. And as you and I have talked about, it doesn't matter if this president or the next president wants to deal with mandatory spending.

We either, as a nation, deal with the mandatory spending, or mandatory spending will deal with the American people or the American government and it will be through the form of austerity measures, like we've seen in Puerto Rico, we've seen in Greece and we've seen in Spain. And if we keep pushing this off, it will be harder to fix. We need -- I don't want to say -- we need to just grow up and say, we have got to address this as a nation. That is not just a Republican issue. It's not just a Democratic issue. This is something that's going to fix -- affect every American across the board. Every American.

BLITZER: All right, I'll be anxious to see how you vote later today on this legislation.

YOHO: Stay tuned.

BLITZER: But let me quickly -- let me quickly switch gears, get to one of our top stories right now.

The White House Chief of Staff John Kelly, as you know, CNN is reporting that General Kelly, he knew about the domestic abuse allegations against the White House Staff Secretary Rob Porter for months -- Porter has now resigned -- but did nothing. Do you think you can still trust the judgment of John Kelly to have that critically important job?

YOHO: I feel very comfortable with General Kelly. I've met with him. I've talked to him. I don't know the ins and outs of what went on there. If -- I can't answer that. They've got offices of ethics. They've got their protocol over there. The important thing is, we don't tolerate those kind of abuses anywhere. And Rob Portman has removed himself from that and resigned. Let's hope we can all do a better job and do a better job of screening, like anybody who's owned a business has gone through this.

BLITZER: Right, Rob Porter -- Rob Porter has now -- he's --

YOHO: Porter, I'm sorry.

BLITZER: He's presumably going to be out as early as today.

But, you know --

YOHO: Right.

BLITZER: The question about General Kelly. He served for many years. He's a four-star general, retired Marine Corps. He's dealt with top secret security clearance, classified information his whole career. If the FBI keeps telling him, you know what, it's a year now, more than a year, we're not going to be able to give your top deputy over there top secret security clearances, there are issues in his past, and you would think he would say, well, what are those issues. And if he's told that he -- the allegations include beating up two ex-wives, he's not going to get top security clearances. You would think he would say, you know what, maybe he should have a different job.

YOHO: From what you just said, I would agree 100 percent with you. But, again, I don't know what the conversations were. But I would have to agree with you.

BLITZER: More than a year waiting for security clearances. That's a long time when you're the White House staff secretary, one of the most important jobs.

YOHO: It is.

BLITZER: And your responsibility is to make sure the president gets all the classified documents he can read, he can study, and you're delivering that to the president and you don't have those kinds of permanent clearances, that's a serious problem in and of itself.

[13:29:54] YOHO: Right. It is. And that points out another problem of, you know, the fights that we have, these short-term spending fights, you know, we've got to focus on getting this government running and doing what it's supposed to do so that we can work through these things so much quicker and we can focus 20 years down the road. You know, we need to look outside of what's just going on here in America.